In the end, the 10.6% closing marked the third worst one-day plunge in the Nikkei's history.

The huge losses on Tuesday came on top of a 6.2% drop Monday, the first full trading day after the quake. In all, the index has fallen nearly 16% in two days.

The Tokyo market opened shortly after the owner of the Fukushima Daiichi nuclear power plant in northeastern Japan reported an "explosive impact" at the plant's No. 2 reactor, a day after a hydrogen explosion rocked another reactor. The plant was among the many structures damaged or destroyed by the 9.0 magnitude earthquake and subsequent tsunami.

Japanese officials said Monday they will backstop the country's financial system, with a cash injection of more than $180 billion, to buffer it against the impact of the disaster. Reports said the Bank of Japan added another $98 billion to that figure on Tuesday.

Other Asian markets were also hit by fears on Tuesday -- a day after modest gains in the face of the Japanese sell-off. Hong Kong's Hang Seng index dropped 3.1%, and the Shanghai Composite fell 1.6%.

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